Market Strength in the Light of Negative News

Last Friday we saw the market rebound based on news out of Europe. Today the markets held up when faced with negative news coming from the Purchaser Managers Index (PMI). The news was released this morning at 7am. Upon the news being released, the markets did drop nominally.

I was surprised that markets across the board did not drop further based on the PMI number missing estimates. PMI is often looked at as a recession predictor and numbers below 50 signal contraction. The PMI fell from 53.5 in May to 49.7 in June. The new orders portion of the index fell to 47.8 from slightly over 60. The market’s resilience in the face of this news surprised me.

I did not expect in the light of the PMI news that major indexes would close almost at the same point markets closed at on Friday. This speaks to current market strength. I would expect this strength to persist for the next week or two. The summer is still young and I expect more turbulence before we get to the fall. The EU summit was a good step forward, but it was not a solution to all that ills the region and the world economically.